Security Vs. Flexibility

MARCELA SANCHEZ WASHINGTON POST WRITERS GROUP

September 30, 2005|MARCELA SANCHEZ WASHINGTON POST WRITERS GROUP

When my father was director of classical music programming for Colombia's public radio network, he was introduced to a new hire who, he was told, was going to make a big splash in that department. He asked the new employee to develop a program on the composer she valued most. Rather quickly, she replied that she would get right to work on the music of Dostoyevsky.

While she didn't last long in the music division, she was quickly moved to another department where she stayed for years.

Colombia has changed somewhat since then, and its current government is trying to implement a system of meritocracy. Still, most Latin American nations retain strict labor regulations that make it difficult to dismiss employees. Hiring, too, has become cumbersome. The result is that Latin American employers find it difficult to adapt to quickly changing economies and business demands.

According to "Doing Business in 2006," a recent report by the World Bank and the International Finance Corp., employers in Latin America today are hamstrung by protectionist measures. In Nicaragua, it is insufficient grounds to dismiss an employee when his work is done by somebody else.

The cost of firing an employee can be prohibitive. In Brazil, the combination of advance notice requirements, severance packages and penalties is the equivalent of paying three years of the fired worker's salary.

Hiring has also become costly. As soon as someone is hired, the employer has to pay payroll taxes and make social security payments to cover everything from a retirement fund to health and unemployment insurance. Today, such payments are two to three times higher in Argentina, Brazil and Colombia than in the United States or Norway.

Ideally, a balance would be struck between measures to protect workers and incentives to facilitate more job creation. Unfortunately, according to World Bank data, Latin America suffers from the greatest imbalance by keeping strict regulations to protect those already employed and making it more expensive for employers to hire new workers.

Today, an estimated 23 million people in Latin America are jobless and 103 million work in an informal job sector that includes people selling goods on the street as well as day laborers. In some Latin American countries, this informal sector makes up to 60 percent of the labor force. This labor crisis explains why in opinion polls, Latin Americans want jobs over anything else, including personal safety, and would even consider a system different from democracy if it gave them jobs.

Five weeks from now, the 34 democratically elected leaders of the Western Hemisphere will meet in Argentina for the fourth Summit of the Americas, and where they've agreed to make job creation the central issue. It hasn't been easy, however, to come to a consensus.

Argentina, for example, doesn't want to leave employees less protected. Washington, on the other hand, favors greater labor flexibility.

Given that this summit will be held at the most contentious time in U.S.-Latin American relations in years, there should be no illusions that such differences will be bridged. What's more, some officials and analysts are convinced that the discussion will remain at such a shallow level that even a summit intended to discuss job creation will avoid any serious debate over labor reform.

While that's likely the case, those involved in the negotiations leading up to the summit see developments worth noting. Washington, for instance, now supports a concept that first caused heartburn among Bush administration officials -- the "decent work" concept.

As promoted by the International Labor Organization, the U.N. agency specializing on labor issues, "decent work" combines the need to respect fundamental workers' rights and to provide social services with the need of governments to adopt a policy of job creation that helps create more and better businesses and promotes a social dialogue between workers and employers.

By reconsidering something like "decent work," Washington is recognizing that it doesn't have all the answers. That is a welcome gesture, particularly considering Latin America's growing skepticism toward U.S. models that have not simply been insufficient but, in the minds of many Latin American officials, ineffective.